The US Foreign Corrupt Practices Act – governs the offering of bribes to foreign government officials to further business interests. China, which shouldn't come as a surprise, falls under the catagory of high risk jurisdictions. Even though the act of gift giving is customary in Chinese culture and business transactions, the giving of certain gifts will run afoul of the FCPA. The US Department of Justice and the Securities Exchange Commission have been stepping up their investigation and punishment of FCPA violations. "If we call them before they call us, it's not where they want to be." (DOJ spokesperson).
Who does it apply to?
(a) Issuers of public securities or those required to regularly report to the SEC, even PRC companies listed in the US.
(b) US citizens, US permanent residents (i.e., green card holders)
(c) Business entitites established in the US or those with a principal place of business in the US (and their senior officers, directors, shareholders or employees)
(d) Foreign businesses or nationals (that cause an indirect or direct corrupt payment in a US territory)
(e)Foreign Subsidiaries of US companies (US companies will be held liable if they authorize, direct or approve of noncompliant activity by their subsidiaries, this also includes situations where they were not actually aware but should have known)
Elements
(1) Giving or Offering
• includes an offer, a promise to pay or payment of anything of value
(2) Anything of Value
• the giving of anything of value includes particularly creative means beyond the obvious exchange of money such as: low interest loans, assistance to get jobs or into educational institutions, credit cards, gym memberships, payment for weddings, holidays etc., and even nonmonetary gifts such as sexual favors, etc. Just use your imagination.
(3) To a “Foreign Official”
• in China this includes: a member/candidate/official of a political party, any officer or employee of the PRC government, a public international organization, or any department, agency thereof, or any person that acts in an official capacity, and also includes employees of State-owned enterprises.
(4) Directly or Indirectly
Means also giving something of value to any person - while knowing that such thing of value will be Given or Offered to a Foreign Official. Knowing includes not only actual awareness or a firm belief, but also a high probabilty that such circumstance will occur or that it exists. Concious disregard is not a defence.
(5) With a Corrupt Intent
• i.e., for the purpose of influencing the Foreign Official in the furtherance of an act or decision in their official capacity or inducing a Foreign Official to use their influence over a foreign government or instrumentality in order to affect its acts or decisions.
(5) To Further Business Objectives
The FCPA does allow payments to Foriegn Officials for the purpose of performance or expediting a routine government action, examples of which include: obtaining permits, licenses, police protection, utilities supply, etc. The focus here is ROUTINE - and means actions that are commonly or ordinarly performed by such Foreign Official. And small nominal gifts are ok too (ask your lawyer what is ok)
Penalties
The penalties for FCPA violations are very very high. And include criminal fines of ($2 million for corporations, and $100k for individuals with a possibility of 5 years prison sentences) and civil fines of $10k for corporations or individuals, not to mention companies run the risk of loosing important licenses, permits or qualifications for continuing their business operations.
See WSJ Article - http://tinyurl.com/r2urug
Final words - do your due dilligence - the DOJ, SEC or your coroporate board will never critisize you for doing tooo much DD.
Check out FCPA BLOG - for all the naughty news - http://fcpablog.blogspot.com/
**this is not legal advice
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